Conveyancers have been bearing the brunt of the most recent sanctions for AML breaches, with financial penalties totalling £109,500 for breaches related to ‘high-risk’ conveyancing transactions.
Although the government has acknowledged the rules are ‘a major burden’ on firms and pledged reforms before the end of the year, the Solicitors Regulation Authority (SRA) shows no sign of easing up on investigations.
In the latest bout of decisions published on the SRA’s website, conveyancers have received the vast majority of sanctions, ranging from £9,000 to £25,000.
Stapletons Solicitors in Palmers Green, London, was fined £9,767 after a desk-based review found the firm failed to maintain a record in writing of its policies, controls and procedures (PCPs) and failing to sufficiently assess the level of risk for client and risk matter assessments (CMRAs).
SRA investigators found that 49% of conveyancing matters dealt with by Stapletons didn’t contain a CMRA: 120 of 272 residential conveyancing matters, and 29 out of 31 commercial conveyancing matters.
On one file, the firm had failed to scrutinise the source of funds for the purchase of a property for £770,000.
“Although there were documents on file to evidence that the clients were the owners of the company, there were no documents to show how the company had accumulated these funds”, the SRA’s investigation noted.
Cooklaw Solicitors Ltd in Sunderland was fined £25,000 for not having a firm-wide risk assessment (FWRA) in place, failing to regularly review and update PCPs, and not carrying out the required customer due diligence (CDD) and enhanced customer due diligence (EDD) measures.
The SRA said in its decision:
“The nature of conveyancing is considered high-risk, owing to the risk of abuse of the system by criminals.
“We note the firm currently undertakes nearly all of its work in-scope of the money laundering regulations, via mainly conveyancing. This puts it at a risk of being used to launder money. Conveyancing is a high-risk area for money laundering and terrorist financing, however there is no evidence of there being any direct loss to clients as a result of the firm’s failure to ensure it had proper documentation in place and despite not conducting necessary checks.”
Brown & Co Solicitors in Greenwich, London agreed to pay a penalty of £9,179 for AML control failings in relation to FWRA, PCPs, CMRAs, CDD and source of funds.
The majority of breaches related to a lack of FWRA and PCPs between 2017 and 2021, along with nine out of ten files found to have non-compliant CMRA forms and one file without the form altogether. A further four out of ten files reviewed were found to have not sufficiently scrutinised source of funds.
The decision noted:
“The issues identified around not having a FWRA, PCPs, a non-compliant CMRA, lack of source of funds checks on four files (including one where EDD was required) are serious AML control failings. The firm undertakes half of its work in scope of the MLRs 2017, by way of conveyancing. This had the potential to open up the firm to a significant amount of risk of being exploited by criminals.”
Russells in East London was fined £9,656 after a desk-based review identified concerns related to FWRA, PCPs, CMRAs, CDD, source of funds checks and lack of checks on politically exposed persons, including sanctions checks.
The SRA said in its decision:
“The conduct showed a disregard for statutory and regulatory obligations and had the potential to cause harm, by facilitating dubious transactions that could have led to money laundering (and/or terrorist financing). This could have been avoided had the firm conducted appropriate risk assessments on its clients and files on in-scope matters.
“The firm has been carrying out a high percentage of high-risk conveyancing historically, but it has failed to have in place compliant PCPs for a period of over seven years. This is a serious breach too.”
HSR Law Limited in Doncaster was ordered to pay a financial penalty of £23,549 for failing to conduct CMRAs.
‘As part of the DBR, the firm was asked to provide its ‘template client and matter risk assessment’,’ the SRA said.
“The firm did provide a compliant CMRA. However, it was unclear how, or if at all, the firm were making use of this form at matter opening or throughout the majority of the matters’ lifespan.
“We recommend a basic penalty at the middle of the bracket. This is because the firm undertakes the majority of its work in conveyancing and was aware that CMRAs were required (as evidenced by its PCPs), yet failed to ensure such CMRAs were completed.”
Clive Farndon, a solicitor and former partner of Andersons Solicitors, was fined £7,619 following an inspection by our AML Proactive Supervision Team, who fined areas of concern related to CDD and CMRAs.
Although the firm had ceased trading and the SRA acknowledged that at the time of the inspection the FWRA, PCPs and CMRA template were found to be compliant, a fine was considered appropriate because:
“The conduct showed a disregard for statutory and regulatory obligations and had the potential to cause harm, by allowing his firm to act in conveyancing matters without a compliant AML control environment in place, that could have led to money laundering (and/or terrorist financing).
“This could have been avoided had Mr Farndon ensured compliance by conducting and documenting CMRAs, since he held all of the compliance roles and seniority within the firm, until its closure on 28 October 2024.”
Keogh Caisley Limited in Tunbridge Wells agreed to pay a penalty of £24,743 for AML control failings related to FWRA, PCPs, CMRAs and source of funds.
The decision noted:
“The issues identified around not having any FWRA and then a non-compliant FWRA, a lack of P&Ps and thereafter PCPs, non-compliant CMRAs as well as not carrying out source of funds checks on two of six files, are serious AML failings, and the conduct had the potential to cause significant harm.
“The firm undertakes almost two thirds of its work in scope of the MLRs 2017, by way of conveyancing. This had the potential to open up the firm to a significant amount of risk of being exploited by criminals.”
The SRA recently shared advice on how firms can ensure they remain compliant with CMRAs, FWRAs, PCPs and source of fund and wealth checks.
5 responses
Whilst I agree that Conveyancing can be considered high risk work, the SRA and the Law Society are extremely poor in supporting Conveyancers and Conveyancing in doing high risk work.
Conveyancing is deemed to be work that no one likes doing, is where the majority of unskilled and unqualified staff practice, is where there is a high risk of claims and is where the charge out rate and fees gathered are the worst amongst legal professionals.
Should the SRA and Law Society wished to support Conveyancers, they would do a much better job in making sure our fees reflected the work conducted, close the gap between CLC firms and SRA firms and stopped the payment of referral fees and ensure proper regulation of factory firms and consultants.
Unfortunately, as we have seen recently with the issues surrounding the TA6, the Law Society is more interested in supporting estate agents in stopping abortive transactions than supporting Conveyancers.
The Law Society must immediately; ban referral agreements, encourage the average conveyancing fee to be a minimum of 0.5% of the property sale/purchase, support Conveyancers/Firms in dealing with a high risk industry, ensure Conveyancers are paid properly (for the work we do the average for a qualified member of staff needs to be £60k P/A), invest in firms technology to mitigate risk, deal with mortgage lenders who wish to give out different instructions and change instructions at the drop of a hat (I am looking at you Nationwide) and stop so many unqualified working as fee earners on matters.
By all means fine those firms that are really not learning their lesson about risk to your hearts content but please for goodness sake reverse the trend of Conveyancing being such a terrible job. We are losing a lot of decent qualified staff because they are fed up and they are not being replaced by qualified staff because no one wants to do the job.
Perhaps if the Law Society had policed and enforced CQS properly, many of the firms that have been fined wouldn’t have been!
I accept firms are ultimately responsible for compliance, but could retaining CQS have signalled to them that they were fully compliant?
This comment is far too sensible and on the money. Please refrain from such comments!!
Sorry David, I will consider my knuckles well and truly wrapped!!!!
The vast majority of firms fined over the last few years have held CQS, which mirrors the MLRs in relation to procedural requirements around FWRAs, CMRAs, CDD, SoF, etc., and THEY chose to comply with the Scheme Rules and to accept the burden that goes with them. So although I accept there is general AML burden, surely actively choosing to comply with CQS leaves them with no excuse for not complying?
The question remains, “is CQS worth the paper it is written on?”
In any event, I don’t think the burden around the above areas is going to reduce in any meaningful way under any review, so don’t get too excited!